Europe Not Giving Up IMF Fight

To many observers outside the continent, never has Europe looked less deserving of retaining its long-standing privilege of picking the head of the International Monetary Fund. Yet never has Europe seemed so convinced it needs to do so.

Even if Dominique Strauss-Kahn fights off the charges he faces, his arrest over the weekend is a deep embarrassment to the Washington-based lender. But this is not the first time the IMF has felt let down by European leadership.

In 2004, many in and around the organization were disappointed when German IMF chief Horst Köhler dropped the job to go back home and run as Angela Merkel’s preferred candidate for German president. Three years later, former Spanish Economics Minister Rodrigo de Rato left the post two years before his term ended, citing “personal reasons.”

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Those rapid-fire exits added weight to the calls for the old carve-up of the leadership of the IMF and the World Bank between the U.S. and Europe to be scrapped. The case was all the stronger as emerging market economies like China and Brazil rose to the fore.

Picking a non-European would have the benefit of signaling a clean break with the past. Picking a leading Indian, Brazilian, Turkish or South African official, for example, to fill the post could win the institution friends in new places and reinforce the message sent by the recent reform of IMF quotas that the institution was attune to the changing world.

What’s more, the prestige of being the first non-European in the job would surely have increased the chances of the new man or woman sticking there for a while — providing the stability and new direction the IMF will surely need in the period ahead.

Those arguments had already gained force before the weekend’s events – even in Europe. In April, U.K. Prime Minister David Cameron moved to block talk of his predecessor, Gordon Brown, getting the job if Mr. Strauss-Kahn stepped down to run for the French presidency. Mr. Cameron said “it may well be that… it’s time actually to have a candidate from another part of the world.”

Yet when push came to shove, Europe’s top officials seem to have decided that having one of their own in the top job was the kind of asset they aren’t prepared to give up on.

European Pressphoto Agency

EU Commission President Jose Manuel Barroso said that if the job comes open, the EU would nominate a candidate to replace Dominique Strauss-Kahn.

Underlying that is a fear is that a non-European IMF chief would have few ties to Europe and be less willing to fight hard — as Mr. Strauss Kahn did — to persuade the IMF board to back assistance for the Euro-zone’s troubled economies of Greece, Portugal and Ireland. Without that help, the financial burden on the rest of the Euro-zone could become overwhelming,

There have already been murmurings of discontent among some emerging market countries about the idea of giving further help to Greece. Why, these voices say, do European countries get multiple chances when there was so little flexibility shown to Asian and Latin American in the 1990s and the early part of this decade.

The result: a chorus of senior European voices Monday saying that while Europe may have to give up on the post one day, that day had not come.

EU Commission President Jose Manuel Barroso said that if the job comes open, the EU would nominate a candidate to replace DSK. Belgian finance minister Didier Reynders said the EU-U.S. balance at the Bretton Woods institutions must be maintained. German Finance Minister Wolfgang Schaeuble warned that Strauss-Kahn should be considered innocent until proven otherwise.

But it was his boss, Ms. Merkel, who came most to the point.

“We know that in the mid-term, developing countries have a right to the post of IMF chief and the post of World Bank chief,” she told reporters. “I think that in the current situation, when we have a lot of discussions about the euro, that Europe has good candidates to offer.”

UPDATE: Some European officials say the EU doesn’t intend to budge on the IMF until the U.S. gives way on the presidency of the World Bank, which doesn’t seem likely to happen now.

About Real Time Brussels

The Wall Street Journal’s Brussels blog is produced by the Brussels bureau of The Wall Street Journal and Dow Jones Newswires. The bureau has been headed since 2009 by Stephen Fidler, who was previously a correspondent and editor for the Financial Times and Reuters. Also posting regularly: Matthew Dalton, Viktoria Dendrinou, Tom Fairless, Naftali Bendavid, Laurence Norman, Gabriele Steinhauser and Valentina Pop.